China's copper consumers are facing increased prices due to market disruptions from leading importer Maike Group's financial issues and production issues at local smelters, causing local premiums to reach record highs.
Copper premiums in Shanghai and Guangdong have sharply risen since H2 of last year, potentially impacting renewable energy and construction industries heavily dependent on copper. The supply disruptions caused by Maike and smelters' maintenance are the main factors behind the premium hike, according to Long Huachen, a copper analyst at Shanghai Metals Market (SMM).
Global copper prices have increased due to anticipation of a rise in Chinese demand as the country, which accounts for half of the world's copper consumption, lifts COVID-19 restrictions. Fitch Solutions predicts China's copper consumption to grow by 4.4% this year, after a 1.5% increase in 2022. Pandemic restrictions also prolonged smelter maintenance and limited copper production growth, especially in Guangdong. However, analysts caution that the global copper market may be overvalued and concerns remain about the pace and extent of China's recovery, as well as the rise in domestic premiums in China.